Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Guaranty Bancshares Inc. In Focus

Based in Addison, Guaranty Bancshares Inc. (GNTY Quick QuoteGNTY - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 17.2%. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.47%. In comparison, the Banks - Southwest industry's yield is 1.32%, while the S&P 500's yield is 1.62%.

Looking at dividend growth, the company's current annualized dividend of $1 is up 4.2% from last year. In the past five-year period, Guaranty Bancshares Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.12%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Guaranty Bancshares's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.

GNTY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.30 per share, with earnings expected to increase 20.44% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that GNTY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).